Consider a corn reserveWe overplant, overfertilize and overproduce, then complain about poor prices. What can we expect? We must lower our cost of production or quit producing.
By: Glen Thompson, Agweek
We overplant, overfertilize and overproduce, then complain about poor prices. What can we expect? We must lower our cost of production or quit producing.
In the past, to control overproduction, the government would pay farmers to set aside land and give them storage payments. I always felt this was counterproductive. Our nation’s economy grows from what we produce. But producing below cost is disastrous.
Responding to this in the 1980s, I wrote to the Agriculture Stabilization and Conservation Service and some politicians, suggesting an alternative. The government has oil reserves, so why not have corn reserves and, instead of paying storage to farmers, give them an interest-free loan and put some corn in underground airtight bunkers on hilltops? Cover it with 6 feet of dirt to stabilize the temperature, and it will last for years without deteriorating. A 20 foot deep, 600-by-100-foot bunker with a heaped auger slope will hold more than 1 million bushels of corn. This could be converted into about 3 million gallons of ethanol. The price of corn would increase immediately and stabilize, which is what farmers and ethanol refineries need. In addition, we would be protecting a food supply from radiation fallout.
Today we are facing the same situation we were in the 1980s. We are at odds with Russia, and the cost of producing corn is more than the corn is worth. Only this time we also have a shortage of railcars. How bad is it right now? I sold 1,000 bushels of corn the first week of August at James Valley Grain in Oakes, N.D. The board of trade showed corn at about $3.80. The price at JVG was $2.82. My check after deducting 50 cents for a moisture discount, 27-cent delayed price charge, a 0.01-cent grain assessment charge and 0.08-cent test weight charge was $1.96 per bushel. Can you imagine $1.96 corn with 2014 expenses?
Either the price must increase or no one in their right mind should be planting corn next year. Our cost of production is in the $500-per-acre range; do the math. Unless a farmer had the foresight to contract next year’s crop when it was profitable, he is now better off buying next year’s production instead of raising it.
Agriculture is the root of our nation’s economy. If agriculture hurts, it will severely stunt our entire economy. With our oversupply, bad prices and rail shortage, we must create long-term underground local storage now. What do you think would happen if we would take 10 to 20 percent of our corn off the market today? Just the news of taking it off the market will increase prices.
Who knows, with a drought next year, we could have $7 corn again and be glad to have a reserve.
Editor’s note: Thompson is from Cogswell, N.D.